Part 1 of a two-part series on the changing role of the CFO. Read Part 2.
Finance has gained new perspectives from the impact of COVID-19, which has created the imperative for every business to move forward as a more agile and digitally-enabled function.
But it can be tough for finance leaders to rise above day-to-day responsibilities to fill the big-picture role their companies need. Many formerly tactical CFOs have become strategic CFOs by taking one step at a time.
Here are three common hurdles on a CFO’s path to becoming more strategic and transformational—and how to move beyond them.
Hurdle #1: Cumbersome planning process
If the budget planning process is an onerous, time-intensive endeavor, it will remain stuck as an annual activity. That means financial insights are relatively static, reactive, and error-prone. To be strategic, CFOs are moving toward more frequent forecasting that needs a streamlined process.
Continuous planning requires financial teams to move beyond mere risk mitigation and financial metrics and to consider operational metrics and opportunity identification. This requires shifting your starting point. Rather than beginning in the past, with last year’s performance, you have to start in the future. Define and establish where you’re headed and the financial resources needed to get there.
Once you have these goals, the next step is to define a schedule for your company to reach those goals. When will strategic reviews take place? How do they translate into operational plans, and how do those plans mesh with your monthly, quarterly, or annual forecasts?
Hurdle #2: Time-intensive data management
Creating a streamlined process requires strong financial leadership. CFOs have to not only measure and report on financial and operational metrics, but also effectively communicate to the entire company its progress on financial and strategic goals. This takes time and sustained effort—which means you can’t bury your head in the numbers all day.
This is where leveraging technology comes in. At some organizations, finance departments spend up to two-thirds of their time gathering and managing financial data and ensuring its accuracy. That means there’s little time left for analysis, and the CFO isn’t able to rely on that deeper thinking when the CEO comes seeking advice.
In order to rise above this scenario, you have to make sure your team is using self-service, especially in reporting and analytics, and automation. A simple, powerful self-service platform provides real-time data, which frees up team members to do the deeper work of investigating that data without continually having to request more information.
Hurdle #3: Department silos
When the finance team is viewed as a separate department on its own little island, everyone loses. Isolation makes it harder to gather accurate, real-time data. That makes budget managers less invested in the budget-planning process, which in turn makes it less likely that departments are held accountable for hitting their budgets and benchmarks. And it happens a lot: Nearly half of respondents in a Workday Adaptive Planning survey of CFOs said their teams could stand to collaborate better.
To avoid this downward spiral, high-performing companies increasingly train their finance teams to be well-rounded leaders from the get-go. By emphasizing general leadership and management skills in addition to quantitative mastery, CFOs ensure their departments are fully invested in the budget process. Put another way: In a world where the future is harder and harder to predict, the best plans must involve everyone in the business. That’s the value of company-wide planning, or extended planning and analysis (xP&A).
For FP&A practitioners, that means working with your team to ensure everyone is communicating clearly and consistently with the rest of the company. And “communicating” doesn’t mean throwing a ton of data at busy colleagues. The information you share has to be relevant and customized to different business units so each team can easily consume it.